ANSWER
Sl No | Particulars | Calculation | Amount @ Sale of 84,000 Units | Amount @ Sale of 90,000 Units | Difference |
1 | Sales Price | $36 | $36 | ||
2 | Variable Cost | $17 | $17 | ||
3 | Contribution | (1) - (2) | $19 | $19 | |
4 | Units Sold | 84,000 Units | 90,000 Units | 6,000 Units | |
5 | Total Contribution | (3) * (4) | $1,596,000 | $1,710,000 | |
6 | Fixed Cost | $175,000 | $175,000 | ||
7 | Depreciation | $575,000 / 4 Years | $143,750 | $143,750 | |
8 | Profit Before Taxes | (5) - (6) - (7) | $1,277,250 | $1,391,250 | |
9 | Tax | 34% | $434,265 | $473,025 | |
10 | Profit after Tax | (8) - (9) | $842,985 | $918,225 | |
11 | OCF | (10) + (7) | $986,735 | $1,061,975 | $75,240 |
Sensitivity of OCF = Change in OCF / Change in the no of units sold
= $75,240 / 6,000 Units
= $12.54
Note : Here in the question I have taken an increse in sale of 6000 units
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